Posted: March 6th, 2014

Alternative Tax System

Goal: Research the concept of an alternate tax system, either Flat Income Tax or National Sales Tax, or a hybrid of the two, and compare this to the current tax code.

Objective: Many feel that the current tax system is both unfair and complex. Some of the richest people in America pay no tax, while a huge share of the tax burden falls on the rest. A mere glance at the tax code confirms that it is far too complex, with volumes of rules that no ordinary person could possibly comprehend. Although the current system gives tax professionals job security, it does lead many to believe that we can move to a more simplified system that would be fairer to them. Based upon your research, determine if an alternate tax system is viable, will provide equity for tax payers, meet social and economic obligations, and if simplicity can be obtained and is a valid argument for change.

Specific Requirements
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Note: You do not need to address Corporate and Excise Tax considerations with this project. This assignment is focused on Individual Income Tax methods.

Develop a more comprehensive understanding of [proposed/conceived] alternative federal income tax systems. Compare and contrast your knowledge to the current income tax system and make a determination if one system would have benefits over another.

I encourage you to compare and contrast different theories related to the topic, or different impacts related to socio-economic conditions. You may inform the reader up front what you thought your findings would be. What were your initial thoughts when you heard about the concept of a “flat tax” or “national tax?” Did your thoughts change based on your research?
Once a topic has been selected, research the following:

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What alternate tax systems are being considered?
Is the alternate method simplistic in computation, collection, reporting, etc?
Is the alternate tax fair? Who defines fairness?
How would the elimination of current adjustment from AGI, for AGI and credits against Income Tax impact the working poor, middle class, and the wealthy? Who may benefit? Who may pay more?
Does the proposed alternate plan address social needs or ability to pay?
Should the tax system be used to address social and economic policies and change? Would an alternate tax prevent what Congress has determined to be societal necessities [saving for retirement, home ownership, charitable giving, etc]? If so, how would this be addressed in an alternate tax system?

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How would an alternate method address the current estate tax system, and accumulation of family wealth?  In today’s economy should this be a concern?
Do you see administrative cost savings?
How does the role of special interest change in an alternate system?
Should consumption be included in the alternative tax system as a way to manage revenue generation and social behavior? Should the federal government continue to tax, or impose a tax on consumer purchases, use of natural resources, control behavior [sin taxation]?
What other countries use an alternate method for taxation. Does it work?
Do you see a more apparent solution than those you have researched? From what you have learned can you suggest a method for taxation that would meet your definition of tax fairness?
From the research information obtained:
Prepare a 3-5 page double spaced typed report on your topic.
The audience for your report is your classroom as a whole.
Include information obtained from your research as outlined noted above. Use at least three different sources and to decipher how the sources differ when addressing this complex subject.
Please be sure to properly introduce your subject matter to the reader. Include the purpose of the report and be aware of the audience reading the report. Do not assume they have knowledge of the topic you have selected for research.
Include your observations and opinions in balance with the factual information.
Offer a closing paragraph(s) in order to summarize the presented information and add your perspective.
Include a reference page with your report noting sources used. Use APA in-text.
For each source cited, give a brief annotation of the source entity. Are they considered conservative, liberal, political party affiliated, etc. How are they funded? This topic is highly subjective, so sources may have bias.

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